Work on tax conformity already underway in St. Paul
St. Paul, Minn. – There are a couple of items the legislature is expecting to get done this legislative session. In the second year of the biennium, a capital investment bill is generally a priority; this year my hope is we pass at least an $800 million bonding bill. When there is a forecasted budget surplus (like this year), the legislature can make adjustments to the budget. You will begin to hear more about that as Gov. Dayton has made his supplemental budget recommendations. One of the other pressing issues legislators will grapple with this year is federal tax conformity. Whenever changes are made to the federal tax code, each state must go through the process of adjusting its own tax code based on the projected effects of the recent changes.
With the passage and signing of the federal tax legislation last fall, decisions need to be made on how to modify our tax code based on the projected changes. Many of the implications of the 2017 tax bill are still unclear, so legislators will have to exercise caution with our level of conformity. On one hand, lack of conformity can complicate filing at the state level, while total conformity would result in hundreds of millions of dollars in tax increases for Minnesotans.
Minnesota starts with the “federal taxable income” and then builds its tax structure from there. It keeps things more simple to use the same starting point with federal and state filing. Filers will already be reporting on their federal returns and then applying state-level deductions and exemptions.
Acting quickly and responsibly will be critical in giving the Department of Revenue time to make necessary changes while also protecting Minnesotans from tax increases headed our way with full conformity.
Minnesota Management and Budget’s February forecast showed a modest surplus and I’m open to using a percentage of the funds to offset some costs that will arise with conformity. However, legislators must act prudently and with long term vision; too much money sunk into offsetting conformity could result in major budget deficits in the years ahead.
The state’s current financial position should bring about healthy and purposeful debate and action. Ideally, this will be a bipartisan effort that leaves politics at the door and conforms our tax code in a way that makes it consistent and easy to understand for the millions of Minnesotans who will be filing their taxes in 2019.
As we work to resolve this issue, it’s important to continually assess the value and fairness of our tax code and how it contributes to our quality of life in Minnesota. Gov. Dayton said it well in his final state of the state: “The hard-working people and businesses of Minnesota are the sources of our renewed economic prosperity and the foundations of our future success.”
Rep. Jeanne Poppe can be reached at the Capitol by email at rep.jeanne.poppe@house.mn or by phone at 651-296-4193.